Opinion

Why the Supreme Court verdict in the coal scam is cause for both hope and despair

The verdict is an affirmation of the judiciary's strength, but the media's part in the coal allocations scandal borders on shameful.

In 2010, while reporting on Chhattisgarh’s mining sector, I first heard about the mysterious misallocations of coal mines. The lawyer and activist Sudiep Shrivastava told me that coal mines were being given to undeserving companies, allocations were in excess of demand, companies were making windfall gains, projects were not coming up, and that the whole process looked rigged to benefit a few.

I downloaded the details of the coal block allocations and began to study them. Shrivastava’s contentions appeared to have merit. India was using around 700 million tonnes of coal every year. Yet the government had hurriedly gone ahead with allocations for 44,000 million tonnes of coal.

Shrivastava wanted to investigate the allocations and file a public interest litigation in court. My aim was humbler: to draw attention to the issue by writing stories in the paper that I worked for.

But writing against the coal allocations meant taking on the dominant dogma in the country – that coal mining had to be expanded at any cost to meet the country’s energy demands. It could not be done without rock solid research. As we plumbed deeper and deeper into the datasheets, we realised that investigating the coal mess required resources that neither he nor I had. Neither activism nor journalism in this country receives the requisite, steady institutional support.

As a state correspondent, I did not have access to the coal ministry in Delhi. I also felt that if indeed so much was amiss, those covering the ministry in Delhi would surely know about it.

The auditor’s report

The media failed to call attention to the coal block allocation scam until it had the safe stick of an auditor’s report to beat the government with. In 2012, the Comptroller and Auditor General of India estimated that India had lost Rs 1.86 lakh crore by giving out coal blocks without auctions. The allocations had been made through a screening committee made up of bureaucrats pliable to influence and political interference.

Soon after the CAG report was leaked to the press, editors, who had previously scoffed at the possibility that coal allocations could have been manipulated, displayed new-found zeal to pursue the story.

The United Progressive Alliance government was already tainted by allegations of malfeasance. Readers and viewers had a huge appetite for stories on corruption. And there were enough small-sized companies that had bagged coal blocks that could be exposed without the worry of lawsuits or loss of advertising revenue.

For weeks, there was frenzied reporting on the subject. But it ended as soon as it started to threaten serious corporate interests.

Thankfully a lawyer, ML Sharma, decided to file a public interest litigation in the Supreme Court challenging the allocations. The non-profit Common Cause, led by Prashant Bhushan, filed another petition shortly after.

In support of these petitions, Sudiep Shrivastava, the lawyer from Chhattisgarh, provided his own meticulous accumulation of evidence. Although this was not admitted as a petition, it was brought on the record by the court.

The verdict

Taking a cue from the CAG, it was now up to India’s apex court to call a spade a spade.

This is precisely what it has done. In their judgement, Justice RM Lodha, Madan B Lokur and Kurian Joseph have come to a scathing conclusion:

“The Screening Committee has never been consistent, it has not been transparent, there is no proper application of mind, it has acted on no material in many cases, relevant factors have seldom been its guiding factors, there was no transparency and guidelines have seldom guided it. On many occasions, guidelines have been honoured more in their breach. There was no objective criteria, nay, no criteria for evaluation of comparative merits. The approach had been ad-hoc and casual. There was no fair and transparent procedure, all resulting in unfair distribution of the national wealth. Common good and public interest have, thus, suffered heavily."

Not only did the court maintain that the process was arbitrary, it pointed out that the policy violated a law that mandated that mining allocations should be made by the states and approved by the Centre, and not made by the Centre and executed by the states, as had happened in the case of coal.

The aftermath

The allocations have been held illegal and arbitrary but they have not been cancelled yet. The court has said it will hold more hearings to determine a future course of action.

One complication for the court is that some of the allocated blocks have started production. During the course of the hearings, the government argued that cancelling the allocations would jeopardise investments amounting to more than Rs two lakh crore.

This, however, is a misleading number.

For one, only 39 of the 218 blocks allocated since 1993 had come into production till December 2013. This number alone is enough to underline the colossal failure of the captive coal block policy.

Two, only a small part of the investment figure cited by the government relates to investment in the coal mines. By its own admission, this came to Rs 8,777 crore for 47 blocks, including 30 under production and 17 nearing production. Limiting the figure to 30 projects, the figure comes down to less than Rs 4,000 crore. The rest of the investment has been made in the end-use projects, which can get coal supplies through Coal India Limited even if the mines are taken back.

At the very least, the government can take back the coal blocks from those who have not started mining them. These mines could then be auctioned through competitive bidding.

Those whose mines are already under production, or those whose end-use projects are complete, could be made to pay a premium through higher royalties for access to cheaper coal. This would equalise the benefits they draw over their competitors and create a level playing field for power producers.

Lost in the din over corruption was the fact that the allocations were also anti-competition: a small number of companies had cornered resources, leaving others out in the cold. Many who had set up power projects were buying coal and incurring higher costs while those without projects were comfortably sitting on reserves.

Undue gains

Oddly enough, the idea of charging a premium from those holding captive coalmines has come not from activists but from the Maharashtra government, which belatedly – and rather surprisingly – admitted in an affidavit filed in the Supreme Court in January this year that the coal block allocations have given “undue gains” to companies. Maharashtra is ruled by a Congress government, which made this admission even more surprising. But confessions are often ploys to preempt punishment. Offering ideas for partial cancellations might be the best way to stave off a wholesale rout.

In the next few days, expect to read commentary that makes ominous warnings against judicial overreach. The courts, someone is sure to argue, cannot decide India’s economic policy. But reading the judgment shows that the court’s statements are well within its rights. It has accepted the government’s position that the economic crisis of the early 1990s necessitated the introduction of a policy that would encourage the private sector to set up power and steel projects. It acknowledges that the eight-year delay in adopting competitive bidding, even after it was mooted by the coal secretary, created avoidable controversy. But it stops short in making any further adverse comment on the government.

“The administrative decision of the Government not to pursue competitive bidding cannot be said to be so arbitrary or unreasonable warranting judicial interference,” the judgement says. “It is not the domain of the Court to evaluate the advantages of competitive bidding vis-à-vis other methods of distribution/disposal of natural resources.”

In that sense, the verdict is welcome affirmation of the strength of India’s judiciary.

It should fill us with hope.

But I must admit it also fills me despair. Why do we always need the auditors and the court to bail us out?

The telecom scandal caused losses to the national exchequer. The coal scam threatened to do much worse. It was not just a story of corruption among India’s elite. It was also a story of the plunder of forests where some of India’s poorest communities live. And it affected all of us – next time you complain about a power cut, remember that a coal scam is partly to blame.

As journalists, we are supposed to write the first draft of history. Why then do we keep missing the most important stories of our times?

We welcome your comments at letters@scroll.in.
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This article was produced by the Scroll marketing team on behalf of Amazon.in and not by the Scroll editorial team.